Soaring cost of heating, petrol and mortgages means families will pay £800 MORE this year

Monday 10 March 2008 01:52 BST

Dramatic increases in household bills will leave the average family £800 worse off this year - even after pay rises.

The cost of fuel, energy and mortgage payments have created a huge burden with every home forced to find an extra £67 each month to make ends meet, research shows.

Disposable income is at its lowest for a decade in what will be seen as a failure for the Labour government.

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Despite salary rises, families face a hike in household bills under the new Budget

Chancellor Alistair Darling will face furious criticism if he fails to take action to reduce the price of gas, electricity and fuel bills in his Budget on Wednesday.

The figures are all the more worrying as he prepares to give a gloomy outlook caused by the worldwide credit crisis.

This year, average income for UK workers will rise by 3.4 per cent - amounting to £533 or £44.45 per month.

Based on the typical household with more than one earner, this is equivalent to £81 per family per month.

But the cost of living has soared by 9 per cent, more than four times the Government's favoured rate of inflation, or by £1,783 a household for the year.

The average increase in monthly expenditure is £148 - meaning there is a £67 deficit per household per month, or £804 per year.

Applied to all 25.9million households in Britain, this is a cost to the nation of £20.8billion, according to research by the independent price comparison website uSwitch.com.

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The highest percentage price rises are in petrol and other fuel.

The average annual outlay on unleaded petrol has climbed by £192 to £1,272.

This is an 18 per cent increase - more than eight times the rate of inflation.

Gas and electricity have rocketed by 13 per cent, or £114, to an average of £1,026, while grocery shopping costs £324 more than a year ago, to £3,180, a rise of 11 per cent.

Worldwide food shortages and a threat to wheat production have caused the price of bread to increase by 28 per cent since 2003.

Average mortgage payments have risen by £1,020, or 9 per cent, to £12,304, thanks to a climb in interest rates last year.

Yet, ministers have failed for a number of years to raise meaningfully the stamp duty threshold that rakes in billions for the Exchequer.

Car insurance and water bills are now 6 per cent higher, while the cost of public transport and council tax are both around 5 per cent more.

By contrast, the increase cost in cigarettes and alcohol is just 1 per cent - fuelling concerns that the Government has not taken enough punitive action on drinking and smoking.

Mr Darling is expected to announce above-inflation tax rises on alcohol to redress the balance.

But campaigners demanded more help to alleviate the cost of petrol, heating and electricity. The Local Government Association and Energy Watch have demanded a windfall tax on energy companies - a call which will go ignored.

The Chancellor is also being urged to cut stamp duty - but it is believed there are no plans for a reduction in the Budget.

Ann Robinson, of uSwitch.com, said: "This is crunch time for UK households as we face up to a downturn in the economy, the news of below-inflation pay rises and the reality of having less money in our pockets. We are working harder, but are certainly not getting any wealthier.

"Hikes in taxes, the cost of food, utility bills and social contributions over the last decade have outpaced the overall rise in income levels, to push disposable incomes in the UK to their lowest level in over a decade.

"This is a bleak time for consumers concerned about their jobs, homes and ability to manage their debts.

Not only are the days of easy credit numbered, but we are also feeling the strain of food and petrol prices rising at their fastest rate since records began.

"People will be looking to the Chancellor to help ease the burden through his next Budget.

"In the meantime, consumers can help themselves by taking a long hard look at their own household budgets to see where they can cut costs."